The Price of Wine

Elroy Dimson, Peter Rousseau and Christophe Spaenjers

No 1019, HEC Research Papers Series from HEC Paris

Abstract: We examine the impact of aging on wine prices and the performance of wine as a long-term investment, using a unique historical database for five long-established Bordeaux wines that we construct from auction and dealer prices. We estimate the life-cycle price patterns with a regression model that avoids multicollinearity between age, vintage year, and time by replacing the vintage effects with annual data on production yields and weather quality. In line with the predictions of an illustrative model, we observe the highest rates of appreciation for young high-quality wines that are still maturing. The findings suggest that the non-financial “psychic return” to holding wines that are substantially beyond maturity is at least 1%. Using an arithmetic repeat-sales regression, we estimate an annualized return to wine investments (net of insurance and storage costs) of 4.1%, in real GBP terms, between 1900 and 2012. Wine underperforms equities over this period, but outperforms government bonds, art, and stamps. Wine and equity returns are positively correlated.

Keywords: alternative investments; luxury goods; price indexes; psychic return; consumption; storage (search for similar items in EconPapers)
JEL-codes: C43 D44 G11 G12 Q11 Z11 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2013-12-10
New Economics Papers: this item is included in nep-agr and nep-cul
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Related works:
Journal Article: The price of wine (2015)
Working Paper: The Price of Wine (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1019

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